Your average poorly informed lefty (but I repeat myself) will reliably tell you that our current fiscal straits are the result of three things: 1. Bushs wars; 2. Bushs tax cuts for the rich; 3. Bushs bank bailouts.

That is not true, of course: The main bank bailouts (odious as they were) have been paid back, often at a profit. The money-losing parts (and the likely money-losing parts) are the ones insisted upon by Barack Obama and his Democratic colleagues: the foreclosure-prevention programs, the endless maintenance of Fannie Mae and Freddie Mac, etc.

The Iraq War, in its most expensive year, cost $140 billion, according to the Congressional Budget Office. Its total cost over the years is estimated at about $700 billion  a good deal less spending than, say, Obamas stimulus package. It is not, and has not been, an exceptionally large driver of our deficit spending.

Our deficit is running around $1.6 trillion. If we took all military spending  not just the Iraq and Afghanistan wars, but the whole shebang  and cut it to $0.00, wed save about $664 billion a year. Iraq and Afghanistan will cost about $170 billion combined in FY2011. Ending the Bush tax cuts for the rich  for the $250,000-and-up crowd, in Obamas formulation  would put on average about another $80 billion a year into Treasury coffers. (CBO estimates the ten-year cost of those tax cuts at $800 billion.) The spending on the wars and the forgone revenue from the Bush tax cuts do not add up to much of that $1.6 trillion deficit: a little less than 16 percent.

The tax cuts for the unrich were a good deal more expensive, which is why Obamas rhetoric on the tax cuts sort of makes my head hurt: The president says he agreed to tax cuts for the rich only to preserve tax cuts for the middle class  which is to say, he agreed to a mere $800 billion in tax cuts that he didnt want in order to preserve a considerable $2.2 trillion in tax cuts that he did want  and then argues that our problem is too many tax cuts, two-thirds of which he was so intent on keeping that he took the other third, too. But even that $2.2 trillion over ten years would not make much of a dent in our $1.6 trillion annual deficit.

And just who are these rich? Under Obamas arbitrary, politically minded cutoffs ($200,000 for an individual, $250,000 for a couple), a public-school administrator earning $130,000 a year married to a pharmacist earning $125,000 a year and raising four kids is rhetorically lumped in with millionaires and billionaires, as the president put it, and desperately in need of a tax hike  but a single guy earning $198,000 a year is in the middle class, and his $2.2 trillion in tax cuts must be protected.

Definitional quibbles aside, the war spending and the Bush tax cuts dont add up to a whole lot in the context of the $1.6 trillion deficit. What does?

The Department of Health and Human Services will see more than $900 billion in outlays in FY2011. About $83 billion of that is discretionary spending on things like the Centers for Disease Control. Almost all of the rest is Medicare and Medicaid  the two programs that President Obama has vowed to shield from substantial reform of the sort envisioned by Rep. Paul Ryan. The other big driver of spending, as the president himself acknowledged yesterday, is Social Security, meaningful reform of which he also promises to resist.

Obamas big plan for the health-care entitlements is appointing a committee, called the Independent Payment Advisory Board (IPAB). This committee will be composed of experts. (Really.) And they will, the president promises, expertly discover ways to reduce Medicare spending. At the end of that sentence is an invisible asterisk: The committee is forbidden to change anything about the structure of Medicare, to increase premiums, to change cost-sharing arrangements, etc.

It is also forbidden, on paper, to ration care. That is because it does not need to ration care: What it can do is cut payments to doctors, pharmacies, hospitals, etc., which simply pushes the dirty work of rationing and denying care off on them. If it costs X to provide a particular service, and IPAB sets the price at We have tried a similar approach before, with legislation that requires cuts in Medicare reimbursement rates. Congress simply votes to suspend the law when the cuts come due. Congress can vote to ignore IPABs cuts, too, though it is procedurally harder to do.

None of which matters very much in the context of a $1.6 trillion deficit and a $14 trillionplus national debt. Current CBO estimates of the savings to be realized from IPAB range from a high of $28 billion over ten years to a low of $0.00 over the same period of time. If IPAB performs to perfection  if it performs twice as well as CBO expects  it still will not make much of a dent in things.

A study from Credit Suisse puts the net value of all the financial assets in the world (excluding real estate) at about $80 trillion ($117 trillion in financial assets minus $37 trillion in household debt). Our unfunded entitlement liabilities are about $100 trillion. Given that they exceed world financial wealth, I suspect that those liabilities are not going to be met. Crazy hunch I have.

As I have argued before, what we are really negotiating about at this point is not how we are going to go about paying for these things, but how we are going to go about not paying for these things. Paul Ryans plan for Medicare is to let Americans shop for health-care coverage and then have the government pay the first $15,000 in premiums  a reasonably generous deal. (And even more generous for the very poor.) That premium support would grow relatively slowly, putting pressure on both consumers and providers of health-care to reduce costs. This is eminently sensible  critical, in fact: The reason that cellphones and computers dont cost $10,000 isnt that Motorola and Apple love us: Its that consumers spending their own money are cost-conscious, so everybody has to compete on both price and quality. The only important products in the United States that do not get better and cheaper every year are K12 education and health care, which are about 97 percent and 55 percent dominated by the government, respectively, and therefore have little consumer-price pressure.

Obamas alternative is another magical committee of wise men, no doubt drawn from the same stale bowl of political Froot Loops from which he spooned up his various czars and advisers, from Marxist nut cutlet Van Jones to tax-dodging Treasury boss Tim Geithner. Markets arent perfect, but I trust consumers to make their own decisions better than I trust Obama and these jokers to make them on our behalf. Either way, cuts are coming, and the main question now is what shape they will take and who gets to make the final choice about health-care decisions: consumers and providers, or Obama and his experts.

 Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism

There are some good points here, but I'm not sure some of these numbers are correct. My understanding about the war in Iraq (and maybe Afghanistan as well) is that a lot of those costs were paid through "off-budget expenditures" that are probably impossible to document accurately.

It's no coincidence that this country's economy began to see the first signs of some serious turbulence back in the mid-2000s when the Federal government stopped reporting one of the key indicators of our nation's money supply (M3).

The reason that cellphones and computers dont cost $10,000 isnt that Motorola and Apple love us: Its that consumers spending their own money are cost-conscious, so everybody has to compete on both price and quality. The only important products in the United States that do not get better and cheaper every year are K12 education and health care, which are about 97 percent and 55 percent dominated by the government, respectively, and therefore have little consumer-price pressure.

To accept the premise that tax cuts 'cost' the government anything is to accept a central tenet of Marxism; ie. that wealth belongs to the state, and individuals may retain it only at the state's discretion.

Mark Levin articulated this fact on his radio show last week -- it's a damned shame that there are no prominent GOP elected officials making the same point everytime the 'Rats demagogue about 'tax cuts for the rich' being a 'cost'.

Your average poorly informed lefty (but I repeat myself) will reliably tell you that our current fiscal straits are the result of three things: 1. Bushs wars; 2. Bushs tax cuts for the rich; 3. Bushs bank bailouts.

Your average poorly informed righty (the willfully blind-types like the author of this article) will reliably tell you that our current fiscal straits are the result of "anyone and everyone but Bush".

It's funny how these willfully-blind neo-cons always ignore Bush's actions upon taking office in 2000 and their effects on the US economy.

Nor do they mention the provision in the USA PATRIOT Act of 2001 that allowed banks to accept the Mexican Matricula Consular card as valid ID to open US bank accounts, while allowed Mexican illegal aliens to obtain US credit cards, auto, home and business loans.

Prior to Bush, this was illegal by law in the US.

They never mention the New Alliance Task Force, formed in 2003.

The NATF is a broad-based coalition of 62 members, including the FDIC, Mexican Consulate, 34 banks, community-based organizations, federal bank regulatory agencies, government agencies, and representatives from the secondary market and private mortgage insurance (PMI) companies.

Their goal was to open the Mexican illegal alien market to US banks and visa-versa using low-cost remittances as the bait. As Bush's 2002 speeches show he was talking about hundreds of billions of U.S. tax dollars going to directly benefit millions of Mexican illegal aliens.

The NATF was organized into four working groups that were tasked with the following goals:

Financial Educationeducates immigrants on the benefits and importance of holding accounts, the credit process, and mainstream banking.

Bank Products and Services Working Groupencourages banks and thrifts to develop financial service products with remittance features as a strategy to reach the unbanked immigrant community.

Mortgage Productscreated the New Alliance Model Loan Product for potential homeowners who pay taxes using an ITIN.

Social Projectsprovides scholarship funds for immigrant students and fosters economic support for Plazas Comunitarias, a program that will give Mexican citizens an opportunity to finish their high school education.

They never mention the American Dream Downpayment Act which gives Mexican illegal aliens US taxpayer dollars for them to use as the down-payment for the houses Bush's Wall Street banker buddies were financing through sub-prime loans.

They never mention Bush hobbling border and interior immigration enforcement.

Worksite arrests of illegal aliens fell some 97 percent, from 2,859 in 1999 to 159 in 2004. Investigations targeting employers of illegal immigrants fell more than 70 percent, from 7,637 in 1997 to 2,194 in 2003. Arrests on job sites fellprecipitously, from 17,554 in 1997 to 445 in 2003. Fines levied for immigration-law violations fell from 778 in 1997 to 124 in 2003. Notices of intent to fine employers fell from 865 in 1997 to just 3 in 2004.

Nor do they mention Bush signing the Social Security Totalization Agreement with Mexico in 2004, which would have allowed Mexican illegal aliens to collect US Social Security benefits for the time they worked illegally in the US. Not only for themselves, but also for their families back home in Mexico, even if they had never stepped foot in America.

Of course, given Bush's record, if I were a Bush lick-spittle, I too, would do everything in my power to blame "anyone and everyone but Bush".

17
posted on 04/18/2011 8:43:12 AM PDT
by Ol' Dan Tucker
(People should not be afraid of the government. Governement should be afraid of the people)

It's funny how these willfully-blind neo-cons always ignore Bush's actions upon taking office in 2000 and their effects on the US economy.

While the items you cite comprise the worst of Bush's presidency, their impact on (a) unemployment, (b) overall federal tax revenues, and (c) overall federal spending are minor.

When it comes to the current fiscal situation of the federal government, most of the blame falls on the massive increases in entitlement spending (Bush is complicit with Kennedy and the democrats that he embraced even while they were stabbing him in the back and screaming that the massive increases were draconian in their cruel inadequacy, and simultaneously savaging him for ballooning the deficit) in the areas of medicare/prescription drug benefits, federal education spending, and other programs.

Tax revenues increased as the economy grew for the first six years of Bush's term in office, but deficits grew because of bipartisan lust for even greater spending growth. Once the Pelosi/Reid congress took the reins in 2007, the economic growth stopped and the wheels predictably came off. The media, also predictably, covered for the democrats and blamed Bush.

While the items you cite comprise the worst of Bush's presidency, their impact on (a) unemployment, (b) overall federal tax revenues, and (c) overall federal spending are minor.

Yes, I agree. Bush did wonderful things for the growth of federal government. Too bad it came at such a terrible cost to the US economy and American citizens.

Tax revenues increased as the economy grew for the first six years of Bush's term in office, but deficits grew because of bipartisan lust for even greater spending growth. Once the Pelosi/Reid congress took the reins in 2007, the economic growth stopped and the wheels predictably came off. The media, also predictably, covered for the democrats and blamed Bush.

The real estate market collapse was due to several factors — primarily the expanse of a credit bubble driven by sub-prime mortgages. The bubble had its origins in the CRA, signed by Jimmy Carter, massive over-extension of Fannie Mae and Freddie Mac in the mortgage markets, loosening of credit standards and subsequent pressure by the FHA under clinton on banks and mortgage lenders to further lower credit standards, expansion of home-equity loans for balances up to the market value of the home, and repackaging of these bad loans into securities sold and resold among banks and other financial institutions. As the economy slowed down in 2007 and into 2008, many of these bad mortgages started going into default, the repackaged securities became worthless (or rather their true value was revealed), borrowers who found themselves under-water walked away, Fannie and Freddie paid themselves huge bonuses, and the house of cards collapsed.

I don’t think that the massive influx of illegal aliens also included a takeover by these illegal aliens of all the major banking and mortgage institutions leading to the all the bad loans and bogus packaging of the bad loans into bundled securities for resale to gullible investors, but I suppose I could be wrong. At any rate, it wasn’t so much the growth of the deficit that caused the real estate market problems (apart from the tightening of the credit markets that the growing deficit necessitated) as much as the slowing economy.

Meanwhile, Bush proposed regulatory reforms to rein in Fannie and Freddie and reform the oversight of the mortgage markets every year from 2001 to 2006, and the republicans that controlled the Congress during those years were unable or unwilling to overcome the obstruction of Barney Frank and Chris Dodd and the rest of the democrats. Like I said before, there is bipartisan blame, especially since the GOP congress had opportunities to implement regulatory reforms (as Bush proposed) but failed to do so. But to blame Bush for the bubble and the failure to prevent its collapse (as Pelosi and Reid and Obama all did), while at the same time claiming that the problem was a lack of regulation, is simply a lie.

The real estate market collapse was due to several factors  primarily the expanse of a credit bubble driven by sub-prime mortgages. The bubble had its origins in the CRA, signed by Jimmy Carter

While it's true that the real estate market collapse was due primarily to the sub-prime loans, the part you're missing is exactly who was the consumer of such loans and the driving force behind these loans.

Yes, Jimmy Carter created the CRA. But, Bush changed the banking rules so that banks serving the 'minority market' through remittances could also claim CRA credit. Everything Bush did during his first term was to open the US banking market to Mexican illegal aliens.

Meanwhile, Bush proposed regulatory reforms to rein in Fannie and Freddie and reform the oversight of the mortgage markets every year from 2001 to 2006, and the republicans that controlled the Congress during those years were unable or unwilling to overcome the obstruction of Barney Frank and Chris Dodd and the rest of the democrats.

I've read the line that Bush tried to rein in Fannie and Freddie, as you've repeated here. I've yet to read precisely of what these regulatory reforms were. Perhaps you could elaborate.

As you'll see Bush is not quite the good guy wearing the white hat that you make him out to be. Read on:

On February 16, 2001, just 3 weeks after his inauguration, President George W. Bush met with Mexican President Vicente Fox to discuss the terms of the Partnership for Prosperity Agreement (with Mexico). (See: Partnership for Prosperity Agreement (with Mexico))

The P4P agreement was signed on September 6, 2001.

On October 26, 2001, Bush signed the USA PATRIOT Act of 2001 into law. Contained in section 326(b) was the provision that allowed US banks to accept the Mexican Matricula Consular card as valid ID for opening a bank account.

Congress sent a request for opinion to Bush's Treasury Dept. about 326(b). Bush's Treasury responded:

The proposed rules set forth the requirement that financial institutions would have to establish a customer identification and verification program applicable to all new accounts that are opened, regardless of whether the customer is a U.S. citizen or a foreign national. While the proposed rules prescribe minimum standards for such programs, they leave sufficient flexibility to permit financial institutions to tailor their program to fit their business operations. The customer identification program would have to contain reasonable procedures for identifying any person, including a business, that opens an account, setting forth the type of identifying information that the financial institution will require. At a minimum, for U.S. persons the proposed rules would require financial institutions to obtain the following information: name, address, taxpayer identification number, and, for individuals, date of birth. While a taxpayer identification number is not required for non-U.S. persons, a financial institution must describe what type of information it will require of a non-U.S. person in place of a taxpayer identification number. The regulations state that financial institutions may accept one or more of the following: a U.S. taxpayer identification number; a passport number and country of issuance; an alien identification card number, or the number and country of issuance of any other government-issued document evidencing nationality or residence and bearing a photograph or similar safeguard.

Note that no Mexican banks accept their own government's Matricula Consular card as valid ID for opening a bank account because the bearer's identity is all but untraceable. In contrast, thanks to Bush's Treasury Dept., almost all US banks accept it.

On June 17, 2002, Bush held a press conference. In this press conference he said that by 2010 he wanted to see 5.5 million new 'minority' home owners.

"Three-quarters of white America owns their homes. Less than 50 percent of African Americans are part of the homeownership in America. And less than 50 percent of the Hispanics who live here in this country own their home. And that has got to change for the good of the country. It just does."

In response to the mandate contained in the P4P agreement, the New Alliance Task Force was formed in May 2003. (See: New Alliance Task Force)

The NATF is a broad-based coalition of 62 members, including the FDIC, Mexican Consulate, 34 banks, community-based organizations, federal bank regulatory agencies, government agencies, and representatives from the secondary market and private mortgage insurance (PMI) companies.

Their goal was to open the Mexican illegal alien market to US banks and visa-versa using low-cost remittances as the bait. As Bush's 2002 speeches show he was talking about hundreds of billions of U.S. tax dollars going to directly benefit millions of Mexican illegal aliens.

The NATF was organized into four working groups that were tasked with the following goals:

Financial Educationeducates immigrants on the benefits and importance of holding accounts, the credit process, and mainstream banking.

Bank Products and Services Working Groupencourages banks and thrifts to develop financial service products with remittance features as a strategy to reach the unbanked immigrant community.

Mortgage Productscreated the New Alliance Model Loan Product for potential homeowners who pay taxes using an ITIN.

Social Projectsprovides scholarship funds for immigrant students and fosters economic support for Plazas Comunitarias, a program that will give Mexican citizens an opportunity to finish their high school education.

"During the past several years, bilateral agreements and U.S. banking laws and regulations have facilitated remittance transfers for immigrants and helped bring the unbanked into the formal banking system. For example, in 2001 the United States and Mexico launched the U.S.-Mexico Partnership for Prosperity which fosters economic and labor opportunities in less developed parts of Mexico and expands access to capital in Mexico. The Partnership also addresses the high cost of sending money from the United States to Mexico and encourages banking institutions to market accounts that offer remittance features to Mexican workers. In addition, the G-8 countries are promoting programs to alleviate poverty in developing countries, including Latin America.17 These programs facilitate remittances through the formal banking system and, at the same time, attempt to reduce the cost of these transfers."

"In June 2004, in an effort to encourage more banks to enter the remittance market and improve access to the U.S. banking system among recent Latin American immigrants, bank regulatory agencies clarified that financial institutions offering low cost international remittance services would receive credit under the Community Reinvestment Act (CRA).18 Regulated financial institutions are required under the CRA to serve the convenience and credit needs of their entire communities, including low- and moderate-income areas. Most remittance senders to Latin America are low- to moderate-income immigrant wage earners who operate outside the formal banking system."

"In addition, a growing number of U.S. banks accept alternative forms of identification to help taxpaying immigrants open bank accounts and secure other banking services; these include the Individual Taxpayer Identification Number (ITIN) and foreign government issued identification, such as the Mexican Matricula Consular card. The USA PATRIOT Act allows financial institutions to accept both forms of identification, enabling insured financial institutions to serve unbanked immigrants who live and work in the United States.The ITIN, created by the U.S. Internal Revenue Service (IRS) for foreign-born individuals who are required to file federal tax returns, is a nine-digit number similar to the social security number (SSN) and is issued to individuals who are not eligible for the SSN. The Matricula Consular card is an identification card issued by the Mexican consulate to individuals of Mexican nationality who live in the United States. According to the Mexican government, an estimated 4 million Matricula cards have been issued in the United States."

"As an example of the effectiveness of using this form of identification, Wells Fargo opened more than 400,000 new accounts for Mexican immigrants, using the Matricula Consular card between November 2001 and May 2004. In recent months, Wells Fargo has averaged 22,000 new accounts per month, many of which feature the bank's remittance product.20 For example, the bank offers InterCuenta Express, an account-to-account wire transfer service that charges $8 to transfer up to $3,000 per day directly into a beneficiary's bank account in Mexico. Transfers can be initiated at the bank's branch or ATM in the United States, and the receiving party can access monies via the bank's sizeable remittance distribution network of more than 4,000 banking offices and 10,700 ATMs in Mexico. According to the Mexican government, 178 banks in the United States accept the Matricula Consular card to open bank accounts; 86 of these institutions are in the Midwest."

Keep in mind this is just Wells Fargo and that sub-prime lending would not reach its peak until 2005-2007. This does not include all the other major banks, such as CitiGroup, Bank of America, Chase, Washington Mutual, or the hundreds of other smaller regional banks and lenders who were also taking part in this feeding frenzy.

The IRS says they've issued over 11 million ITINs since its inception. Mexico says they've issued over 5 million Matricula Consular cards.

But, none of this would be workable if ICE was deporting the banks' new customers. Once again, Bush swung into action, hobbling border and interior enforcement.

Worksite arrests of illegal aliens fell some 97 percent, from 2,859 in 1999 to 159 in 2004. Investigations targeting employers of illegal immigrants fell more than 70 percent, from 7,637 in 1997 to 2,194 in 2003. Arrests on job sites fellprecipitously, from 17,554 in 1997 to 445 in 2003. Fines levied for immigration-law violations fell from 778 in 1997 to 124 in 2003. Notices of intent to fine employers fell from 865 in 1997 to just 3 in 2004.

When the USA PATRIOT Act came up for renewal in 2004, some republicans wanted to remove the provision that allowed banks to accept Matricula Consular ID as the consular ID is unreliable.

Barney Frank (D-MA) and some of his Republican and Democrat friends swung into action to protect it:

In a vote of 222 to 177, the U.S. House of Representatives passed a bipartisan amendment, H.Amdt. 754, introduced by Reps. Michael Oxley (R-OH), Barney Frank (D-MA), Jim Kolbe (R-AZ), Ed Pastor (D-AZ), and Rubén Hinojosa (D-TX) to strike the so-called Culberson amendment that would have prohibited the Treasury Dept. from implementing regulations that allow financial institutions to accept matrícula consular identification cards as part of a valid customer identification program under the USA PATRIOT Act... In countering Culbersons allegations that the FBI and the Justice Dept. were opposed to the bipartisan amendment to preserve the use of matrícula consular cards, Bachus presented a letter for the record written by Deputy Atty. Gen. James B. Comey and addressed to Speaker of the House Dennis Hastert. The letter, dated Sept. 14, 2004, stated: The Department of Justice fully supports the Administrations current policy under the USA PATRIOT Act that requires banks and other financial institutions to establish reasonable procedures for the identification and verification of new account holders, which is set forth in regulations of the Department of the Treasury. Therefore the [Justice] Department supports the Oxley-Frank-Kolbe amendment to H.R. 5025 that preserves these regulations. . . . The Department of Justice, including the FBI, continue[s] to work closely with the Treasury Department on this and other issues related to halting all financing of terrorists.

In the final roll call vote, 49 Republicans supported the Oxley-Frank-Kolbe-Pastor-Hinojosa amendment and 16 Democrats opposed it. This legislative victory was a joint effort by financial institutions, immigrants rights groups, consumer groups, and many others who worked in coalition to defeat, once again, efforts to limit the acceptance of consular ID cards by banks, credit unions, thrifts, and other financial entities.

In Bush's June 17, 2002 speech, he also called for the creation of the American Dream Down Payment Fund.

"And so here are some of the ways to address the issue. First, the single greatest barrier to first time homeownership is a high downpayment. It is really hard for many, many, low income families to make the high downpayment. And so that's why I propose and urge Congress to fully fund the American Dream Downpayment Fund. This will use money, taxpayers' money to help a qualified, low income buyer make a downpayment. And that's important."

"Amends the Cranston-Gonzalez National Affordable Housing Act to: (1) authorize the Secretary of Housing and Urban Development to make grants to State and local participating jurisdictions for downpayment assistance and related home repair to low-income, first-time home buyers; and (2) limit family assistance to the greater of six percent of the purchase price or $10,000. Requires a participating jurisdiction to include intended grant uses in its fiscal year comprehensive housing affordability strategy under such Act."

Park Place South is, in microcosm, the story of a well-intentioned policy gone awry. Advocating homeownership is hardly novel; the Clinton administration did it, too. For Mr. Bush, it was part of his vision of an ownership society, in which Americans would rely less on the government for health care, retirement and shelter. It was also good politics, a way to court black and Hispanic voters.

But for much of Mr. Bushs tenure, government statistics show, incomes for most families remained relatively stagnant while housing prices skyrocketed. That put homeownership increasingly out of reach for first-time buyers like Mr. West.

So Mr. Bush had to, in his words, use the mighty muscle of the federal government to meet his goal. He proposed affordable housing tax incentives. He insisted that Fannie Mae and Freddie Mac meet ambitious new goals for low-income lending.

Concerned that down payments were a barrier, Mr. Bush persuaded Congress to spend up to $200 million a year to help first-time buyers with down payments and closing costs.

And he pushed to allow first-time buyers to qualify for federally insured mortgages with no money down. Republican Congressional leaders and some housing advocates balked, arguing that homeowners with no stake in their investments would be more prone to walk away, as Mr. West did. Many economic experts, including some in the White House, now share that view.

The president also leaned on mortgage brokers and lenders to devise their own innovations. Corporate America, he said, has a responsibility to work to make America a compassionate place.

And corporate America, eyeing a lucrative market, delivered in ways Mr. Bush might not have expected, with a proliferation of too-good-to-be-true teaser rates and interest-only loans that were sold to investors in a loosely regulated environment.

This administration made decisions that allowed the free market to operate as a barroom brawl instead of a prize fight, said L. William Seidman, who advised Republican presidents and led the savings and loan bailout in the 1990s. To make the market work well, you have to have a lot of rules.

But Mr. Bush populated the financial systems alphabet soup of oversight agencies with people who, like him, wanted fewer rules, not more.

The presidents first chairman of the Securities and Exchange Commission promised a kinder, gentler agency. The second was pushed out amid industry complaints that he was too aggressive. Under its current leader, the agency failed to police the catastrophic decisions that toppled the investment bank Bear Stearns and contributed to the current crisis, according to a recent inspector generals report.

As for Mr. Bushs banking regulators, they once brandished a chain saw over a 9,000-page pile of regulations as they promised to ease burdens on the industry. When states tried to use consumer protection laws to crack down on predatory lending, the comptroller of the currency blocked the effort, asserting that states had no authority over national banks.

The administration won that fight at the Supreme Court. But Roy Cooper, North Carolinas attorney general, said, They took 50 sheriffs off the beat at a time when lending was becoming the Wild West.

The president did push rules aimed at forcing lenders to more clearly explain loan terms. But the White House shelved them in 2004, after industry-friendly members of Congress threatened to block confirmation of his new housing secretary.

"In the 2004 election cycle, mortgage bankers and brokers poured nearly $847,000 into Mr. Bushs re-election campaign, more than triple their contributions in 2000, according to the nonpartisan Center for Responsive Politics. The administration did not finalize the new rules until last month."

Among the Republican Partys top 10 donors in 2004 was Roland Arnall. He founded Ameriquest, then the nations largest lender in the subprime market, which focuses on less creditworthy borrowers. In July 2005, the company agreed to set aside $325 million to settle allegations in 30 states that it had preyed on borrowers with hidden fees and ballooning payments. It was an early signal that deceptive lending practices, which would later set off a wave of foreclosures, were widespread.

Andrew H. Card Jr., Mr. Bushs former chief of staff, said White House aides discussed Ameriquests troubles, though not what they might portend for the economy. Mr. Bush had just nominated Mr. Arnall as his ambassador to the Netherlands, and the White House was primarily concerned with making sure he would be confirmed.

Maybe I was asleep at the switch, Mr. Card said in an interview.

Brian Montgomery, the Federal Housing Administration commissioner, understood the significance. His agency insures home loans, traditionally for the same low-income minority borrowers Mr. Bush wanted to help. When he arrived in June 2005, he was shocked to find those customers had been lured away by the fools gold of subprime loans. The Ameriquest settlement, he said, reinforced his concern that the industry was exploiting borrowers.

In December 2005, Mr. Montgomery drafted a memo and brought it to the White House. I dont think this is what the president had in mind here, he recalled telling Ryan Streeter, then the presidents chief housing policy analyst.

It was an opportunity to address the risky subprime lending practices head on. But that was never seriously discussed. More senior aides, like Karl Rove, Mr. Bushs chief political strategist, were wary of overly regulating an industry that, Mr. Rove said in an interview, provided a valuable service to people who could not otherwise get credit. While he had some concerns about the industrys practices, he said, it did provide an opportunity for people, a lot of whom are still in their houses today.

The White House pursued a narrower plan offered by Mr. Montgomery that would have allowed the F.H.A. to loosen standards so it could lure back subprime borrowers by insuring similar, but safer, loans. It passed the House but died in the Senate, where Republican senators feared that the agency would merely be mimicking the private sectors risky practices  a view Mr. Rove said he shared.

A soft-spoken Texan, Mr. Falcon ran the Office of Federal Housing Enterprise Oversight, a tiny government agency that oversaw Fannie Mae and Freddie Mac, two pillars of the American housing industry. In February 2003, he was finishing a blockbuster report that warned the pillars could crumble.

Created by Congress, Fannie and Freddie  called G.S.E.s, for government-sponsored entities  bought trillions of dollars worth of mortgages to hold or sell to investors as guaranteed securities. The companies were also Washington powerhouses, stuffing lawmakers campaign coffers and hiring bare-knuckled lobbyists.

Mr. Falcons report outlined a worst-case situation in which Fannie and Freddie could default on debt, setting off contagious illiquidity in the market  in other words, a financial meltdown. He also raised red flags about the companies soaring use of derivatives, the complex financial instruments that economic experts now blame for spreading the housing collapse.

Today, the White House cites that report  and its subsequent effort to better regulate Fannie and Freddie  as evidence that it foresaw the crisis and tried to avert it. Bush officials recently wrote up a talking points memo headlined G.S.E.s  We Told You So.

Mortgage lenders appear to have regarded Latinos as a largely untapped demographic. Many were first or second-generation U.S. residents who didn't own homes. Many Hispanic families had multiple wage earners working multiple cash jobs, but had no savings or established credit history to allow them to qualify for traditional loans.

The Congressional Hispanic Caucus created Hogar in 2003 to work with industry and community groups to increase mortgage lending to Latinos. At that time, the national Latino homeownership rate was 47%, compared with 68% for the overall population. Hogar called the figure "alarming," and said a concerted effort was required to ensure that "by the end of the decade Latinos will share equally in the American Dream of homeownership."

Hogar's backers included many companies that ran into trouble in mortgage markets: Fannie Mae and Freddie Mac, both now under federal control; Countrywide Financial Corp., sold last year to Bank of America Corp.; Washington Mutual Inc., taken over by the government and sold to J.P. Morgan Chase & Co.; and New Century Financial Corp. and Ameriquest Mortgage Corp., both now defunct.

Hogar's ties to the subprime industry were substantial. A Washington Mutual vice president served as chairman of its advisory committee. Companies that donated $150,000 a year got the right to place a research fellow who would conduct Hogar's studies, which were used by industry lobbyists. For donations of $100,000 a year, Hogar offered to provide news releases from the Hispanic Caucus promoting a lender's commercial products for the Latino market, according to the group's literature.

Hogar worked with Freddie Mac on a two-year examination of Latino homeownership in 63 congressional districts. The study found Hispanic ownership on the rise thanks to "new flexible mortgage loan products" that the industry was adopting. It recommended further easing of down-payment and underwriting standards.

...

Mortgage lending to Hispanics took off between 2004 and 2007, powered by nonprime loans. The biggest jump occurred in 2005. The 169% increase in nonprime mortgages to Hispanics that year outpaced a 122% gain for blacks, and a 110% increase for whites, according to a Journal analysis of mortgage-industry and federal-housing data. Nonprime mortgages carry high interest rates and are tailored to borrowers with low credit scores or few assets.

Between 2004 and 2007, black borrowers were offered nonprime loans at a slightly higher rate than Hispanics, but the overall number of Hispanic borrowers was much larger. From 2004 to 2005, total nonprime home loans to Hispanics more than tripled to $69 billion from $19 billion, and peaked in 2006 at $73 billion.

...

Regions of the country where the housing bubble grew biggest, such as California, Nevada and Florida, are heavily populated by Latinos, many of whom worked in the construction industry during the housing boom. When these markets began to weaken, bad loans depressed the value of neighboring properties, creating a downward spiral. Neighborhoods are now dotted with vacant homes.

By late 2008, one in every nine households in San Joaquin County, Calif., was in default or foreclosure -- 24,049 of them, according to Federal Reserve data. Banks have already taken back 55 of every 1,000 homes. In Riverside, Calif., 66,838 houses are owned by banks or were headed in that direction as of October. In Prince William County, Va., a Washington suburb, 11,685 homes, or one in 11, was in default or foreclosure.

...

These days, James Scruggs of Northern Virginia Legal Services is swamped with Latino borrowers facing foreclosure. "We see loan applications that are complete fabrications," he says. Typically, he says, everything was marketed to borrowers in Spanish, right up until the closing, which was conducted in English.

"We are not talking about people working for the World Bank or the IMF," he says. "We are talking about day laborers, janitors, people who work in restaurants, people who do babysitting."

Two such borrowers work in Mr. Scrugg's office. Sandra Cardoza, a $28,000-a-year office manager, is now $30,000 in arrears on loans totaling $370,000. "Her loan documents say she makes more than me," says Mr. Scruggs.

25
posted on 04/20/2011 8:27:38 AM PDT
by Ol' Dan Tucker
(People should not be afraid of the government. Governement should be afraid of the people)

The main bank bailouts (odious as they were) have been paid back, often at a profit. The money-losing parts (and the likely money-losing parts) are the ones insisted upon by Barack Obama and his Democratic colleagues: the foreclosure-prevention programs, the endless maintenance of Fannie Mae and Freddie Mac, etc. The Iraq War, in its most expensive year, cost $140 billion, according to the [CBO]. Its total cost over the years is estimated at about $700 billion -- a good deal less spending than, say, Obama's stimulus package... Our deficit is running around $1.6 trillion. If we took all military spending... and cut it to $0.00, we'd save about $664 billion a year... The tax cuts for the unrich were a good deal more expensive... [Zero] agreed to a mere $800 billion [over ten years] in tax cuts that he didn't want in order to preserve a considerable $2.2 trillion in tax cuts that he did want -- and then argues that our problem is too many tax cuts, two-thirds of which he was so intent on keeping that he took the other third, too. But even that $2.2 trillion over ten years would not make much of a dent in our $1.6 trillion annual deficit.

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